PRADEEP DALAL, MUMBAI V. ITO 20(2)(3), MUMBAI

ITA 5978/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49148 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 10-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALEXANDER CHANDY
• Assessee Lawyers: RITIKA GARG
• Keywords: Business income; Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI VIJAY PAL RAO (J M) I.T.A.NO.5978/MUM/2009 (A.Y. 2001-02) SHRI PRADEEP DALAL, A/21, VISHNU BAUG, 137, S.V. ROAD, ANDHERI (W), MUMBAI-400 058. PAN: AAQPO1940E VS. INCOME-TAX OFFICER-20(2)(3), MUMBAI. APPELLANT RESPONDENT APPELLANT BY MS. RITIKA GARG. RESPONDENT BY SHRI A LEXANDER CHANDY. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT(A) 15-09-2009 IN RELATION TO ASSTT. YEAR 2001-02 UPHOL DING PENALTY OF RS.92,809/- IMPOSED BY THE AO U/S.271(1)(C) OF THE ACT. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS CARRYING ON BUSINESS OF TRADING IN SHARES AND EARNING COMMISSIO N ON SALE OF CAPACITORS. A SUM OF RS.6,42,883/- WAS SHOWN AS COMMISSION INCOME IN THE P & L A/C. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICE D BY THE AO THAT A FURTHER SUM OF RS.64,029/-, WHICH HAD ACCRUED TO THE ASSESS EE AS COMMISSION ON SALE OF CAPACITORS IN THIS YEAR, WAS NOT SHOWN IN THE RETUR N. THE ASSESSEE ARGUED THAT HE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING TO RECOR D THE COMMISSION INCOME AND SINCE THE SAID AMOUNT WAS NOT RECEIVED, THE SAME WA S NOT INCLUDED IN THE ITA NO.5978/M/2009 PRADEEP DALAL. 2 INCOME. NOT CONVINCED, THE AO MADE ADDITION OF RS. 64,029/-. IT WAS ALSO NOTICED BY THE AO THAT AGAINST THE COMMISSION INCOME OF RS. 6,42,883/- SHOWN IN THE P & L A/C., THE ASSESSEE ADJUSTED LOSS INCURRED IN HIS SPECULATION OF SHARE TRANSACTION AND NON-SPECULATION INCOME OF SHARE TRADING BUSINES S. THE AO REFUSED TO ACCEPT THE ASSESSEES CONTENTION. 3. THEREAFTER, PENALTY PROCEEDINGS WERE INI TIATED. IN SUCH PENALTY PROCEEDINGS, THE ASSESSEE REITERATED THE SAME SUBMI SSION QUA THE AMOUNT OF COMMISSION INCOME. RELIANCE WAS ALSO PLACED ON CER TAIN DECISIONS FOR CONTENDING THAT THAT THE DISALLOWANCE OF CLAIM OF LOSS IN SHAR ES AS SPECULATION LOSS WOULD NOT MEAN THAT THE ASSESSEE HAD CONCEALED INCOME OR FURN ISHED INACCURATE PARTICULARS OF INCOME. THE AO WAS NOT PERSUADED. HE IMPOSED PEN ALTY OF RS.92,809/- WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. 4. WE HAVE THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. THE FIRST ISSUE ON WHICH PENALTY HAS BEEN C ONFIRMED IS NON-DISCLOSURE OF COMMISSION INCOME. THE ASSESSEE CONTENDED BEFORE TH E AO THAT THE COMMISSION INCOME WAS NOT RECEIVED IN THIS YEAR, WHICH FACT W AS DULY ACKNOWLEDGED BY THE AO, WHO STILL CHOSE TO GO AHEAD WITH ADDITION ON T HE GROUND THAT SUCH INCOME HAD ACCRUED TO THE ASSESSEE. THE CONTENTION OF THE ASSESSEE THAT HE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING FOR RECORDING C OMMISSION INCOME WAS NOT FOUND TO BE ACCEPTABLE. IT IS SEEN FROM TITLES OF T HE ASSESSMENT ORDER THAT THE METHOD OF ACCOUNT HAS BEEN MENTIONED AS MERCANTIL E & CASH SYSTEM. FURTHER, THE TAX AUDIT REPORT OF THE ASSESSEE ALSO CLEARLY M ENTIONS AGAINST COLUMN 11 THAT THE COMMISSION INCOME WAS RECORDED ON CASH BASIS. I N SUCH CIRCUMSTANCES, IT BECOMES APPARENT THAT THE COMMISSION AMOUNT OF RS.6 4,029/- DOES NOT QUALIFY FOR PENALTY, NOTWITHSTANDING THE FACT THAT THE ASS ESSEE ACCEPTED THE ADDITION. ITA NO.5978/M/2009 PRADEEP DALAL. 3 THE SECOND GROUND OF THE AO FOR IMPOSING PENALTY IS THAT THE LOSS ARISING FROM SPECULATION BUSINESS COULD NOT BE SET OFF AGAINST P ROFITS & GAINS OF REGULAR BUSINESS. IT IS SEEN FROM THE COPY OF P & L A/C. PL ACED BEFORE US THAT THE ASSESSEE HAD RECORDED THE TRANSACTIONS RELATING TO COMMISSION AS WELL AS SHARE BUSINESS IN A CONSOLIDATED MANNER. ONE P & L A/C. W AS DRAWN BECAUSE THE ASSESSEE WAS HAVING ONE SET OF BOOKS OF ACCOUNT FOR RECORDING THE TRANSACTIONS FROM BOTH THE BUSINESSES. FURTHER, THE FACT THAT TH E INCOME FROM SHARES WAS TAXED AS SPECULATION BUSINESS AND THE SET OFF WAS N OT ALLOWED WOULD NOT MEAN THAT THE ASSESSEE HAD CONCEALED HIS INCOME OR FURNI SHED INACCURATE PARTICULARS OF HIS INCOME. MERE CHANGE IN THE HEAD OF INCOME, UNDE R WHICH THE INCOME IS ASSESSABLE DOES NOT LEAD TO THE IMPOSITION OF PENAL TY. WHEN ALL THE NECESSARY FACTS WERE STATED AND THE ASSESSEE ENTERTAINED A VI EW THAT THE COMMISSION INCOME AND INCOME FROM SHARES WERE LIABLE TO BE TAX ED UNDER THE HEAD BUSINESS INCOME AND THE RESULTANT SET OFF WAS AVAILABLE, TH E NON-ACCEPTANCE OF THE ASSESSEES POINT OF VIEW WOULD NOT BRING THE CASE WITHIN THE FOUR CORNERS OF SEC. 271(1). IN OUR CONSIDERED OPINION THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE PENALTY IN THE GIVEN CIRCUMSTANCES. WE, THEREFO RE, OVERTURN THE IMPUGNED ORDER AND ORDER FOR THE DELETION OF PENALTY. 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THE 10TH DAY OF JUNE, 2011. SD/- SD/- (VIJAY PAL RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 10TH JUNE , 2011. NG: ITA NO.5978/M/2009 PRADEEP DALAL. 4 COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-31,MUMBAI. 4 CIT-XI,MUMBAI. 5.DR,C BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.5978/M/2009 PRADEEP DALAL. 5 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 07-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 08-06-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *